HUNGARY Law and Practice Contributed by: Attila Ungár and Júlia Várkonyi, Lakatos, Köves & Partners
The cost related to transfer tax is typically not shared between the purchaser and the seller in a transaction, but it is always considered by the parties when the acquisition structure is being set up. In addition, the transfer of real estate that has been rezoned as incorporated land and the transfer of the shares of a company holding such land are subject to transfer tax, payable by the seller. The rate of transfer tax is 90%, which is levied on the following: • the difference between the market value of the real estate being sold, at the time of acquisition by the seller, and the market value established for the time of transfer; or • in the sale of shares of a company holding real estate that has been rezoned as incorpo - rated land, the difference established accord - ing to the foregoing in proportion to the ratio in which the shares are sold compared to all shares. The transfer tax is applicable if the rezoning took place within ten years of the sale (taking into account the predecessor’s period of tenure of ownership in certain cases). However, no trans - fer tax is payable if the real estate was rezoned in the sixth year after the seller’s acquisition, nor if it was acquired by inheritance. A preferential transfer tax rate (flat rate of 2%) can be applied to acquisitions by real estate funds, credit institutions, real estate traders or REITs. However, the HUF200 million cap cannot be applied in these cases. In a special procedure, the paid transfer tax can be reclaimed from the tax authority in relation to the renovation of a historical building if the National Trust of Monuments for Hungary certi -
fies that the renovation has begun within one year of filing the notice of the title change with the tax authority that imposed the transfer tax and the renovation is finished within five years. Various exemptions are also available – for exam - ple, subject to further conditions, no transfer tax is payable if the transfer takes place between related parties and in cases of a preferred trans - formation or exchange of shares or transfer of business. 2.11 Legal Restrictions on Foreign Investors The acquisition of real estate by foreigners (ie, natural or legal persons outside the EU or the European Economic Area (EEA)) is subject to the approval of the competent government office, which is granted if the acquisition of the real property does not constitute harm to local gov - ernment or other public interests. Only natural persons may acquire agricultural land; the acquisition of such land by foreigners (who are not citizens of the EU or the EEA) is excluded. The New Hungarian FDI Regime was introduced to provide “economic protection to Hungar - ian companies” in connection with COVID-19, focusing on the origin of the investor and the activities of the Hungarian target companies. Foreign investors are investors that are regis - tered outside the EU, EEA or Switzerland, or that are controlled by an entity registered in a country outside of the EU, EEA or Switzerland. The Hungarian FDI Regime is drafted in a way that covers as many transactions as it reason - ably can. The applicable FDI laws are vague and often confusing, which makes it difficult in cer - tain situations to decide whether a transaction is
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